President Jo Joo-wan: "Resolving Performance Headwinds... Accelerating in the Electric Vehicle Sector" (Comprehensive)

LG Electronics President Holds Press Conference at CES 2023 Venue

[Las Vegas=Asia Economy Reporter Park Sun-mi] Amid LG Electronics recording an 'earnings shock' in the fourth quarter of last year, President Cho Joo-wan expressed an optimistic response, stating that the fundamental causes of profitability deterioration are in the process of being resolved and that the company will show good performance starting from the first quarter of this year.

On the 6th (local time), President Cho held a press conference at CES 2023 in Las Vegas, USA, explaining, "Cost-related adverse factors have been significantly alleviated since the fourth quarter of last year," and "Logistics costs, which had increased considerably last year, are returning to normal, so we expect to show good results from the first quarter of this year."

Along with improvements in external factors, he said that internally, they are successfully executing 'winning growth and growing change.' President Cho added, "As a market leader in home appliances, we are maintaining market share, and despite a sharp decline in TV demand, we are increasing the share of premium products," and "Overall, the situation is not as severe as some fear, and I am confident because it is positive."

LG Electronics preliminarily reported that its consolidated operating profit for the fourth quarter of last year was 65.5 billion KRW, a 91.2% decrease compared to the same period the previous year. This is the first time in four years that quarterly operating profit has fallen below 100 billion KRW. The global economic downturn led to an overall decrease in product demand, compounded by rising raw material prices, increased logistics and marketing costs, and a sharp drop in the KRW-USD exchange rate in the fourth quarter.

President Cho expects that while the economic downturn atmosphere will not end within the first half of the year, recovery will gradually begin in the second half, mainly in the North American region. He said, "Even in crisis situations, opportunities have always existed, so rather than short-term cost reductions, we will focus on improving the business structure to continuously generate profits despite prolonged recession and create a competitive business model."

He also expressed expectations for the automotive components business. He said, "The automotive components business has succeeded in turning a profit for the first time in 10 years, and now only acceleration on the highway remains," adding, "We expect automotive components sales to exceed 10 trillion KRW this year." Vice President Eun Seok-hyun, head of the VS Business Division, who also attended the press conference, said, "Automotive components account for about 10% of total sales," and added, "Based on an order backlog of 80 trillion KRW, we expect sales to exceed 15 trillion KRW by around 2025, and if it surpasses 20 trillion KRW, we believe LG Electronics will become a meaningful player in the automotive industry."

The order backlog of 80 trillion KRW as of the end of last year is a figure that demonstrates LG Electronics' strong global competitiveness in the automotive components business. LG Electronics is preparing next-generation IVI solutions based on software that integrates in-vehicle infotainment systems and has started mass production of electric vehicle drive components supplied to global automakers, realizing economies of scale. As a result, the automotive components business is expected to enter a full-fledged growth phase starting this year.

Meanwhile, LG Electronics is expanding its business areas from hardware-centered to non-hardware sectors such as platforms, content & services, and solutions, based on the perspective that customers purchase experiences, not just products. This is part of a strategy to enhance its portfolio by connecting resources secured in various fields to discover customized services and solutions that can be provided alongside hardware.

President Cho explained, "We will further advance the content and service business led by our proprietary operating system webOS, which powers over 180 million LG smart TVs worldwide," adding, "The webOS content business, led by ad-supported free broadcasting services such as LG Channels, grew nearly tenfold in sales last year compared to 2018."

He continued, "The smart home platform LG ThinQ is evolving into a platform that encompasses the entire customer experience journey by not only linking devices simply but also collecting customer data and using it to develop customized products and provide services," he added.